Chinese Nationalist Party (KMT) presidential candidate Hung Hsiu-chu (洪秀柱) yesterday announced the first of her plans aimed at “shattering the nation’s low-wage curse,” offering more tax deductions to corporations that provide employees with salary increases.
Tearing up a paper placard on which was printed “Breaking the 22K curse” — referring to the NT$22,000 (US$679.68) average starting salary for university graduates — Hung said that while the world was suffering from an economic recession, no nation could afford to sit back and do nothing.
“Low wages are a dire global problem facing today’s young generation that demands an immediate solution, which I plan to address with a series of proposals I will unveil in the days to come,” Hung told a news conference in Taipei.
Photo: Wang Min-wei, Taipei Times
In her “pilot” proposal, small and medium enterprises would be allowed to deduct from their taxes 200 percent of the increases in the first year, 160 percent in the second year and 130 percent in the third year.
A revision to the Small and Medium Enterprises Development Act (中小企業發展條例) passed by the Executive Yuan last year stipulates that companies are allowed to claim 130 percent of raises given to their employees as deductible expenses on their taxes, Hung said.
“Also, I propose that companies hiring individuals aged 29 or younger be allowed to declare 150 percent of those salaries as deductible expenses,” she said.
Hung said the policy would only make a small dent in the government’s tax revenue, approximately NT$64 million per year based on data used for the Executive Yuan’s amendment, but could prompt a wave of pay increases and stimulate economic development.
She went on to call on the Democratic Progressive Party (DPP) not to tackle the issue with a campaign-centric mindset, but rather employ a rational process to work out a concrete solution.
The Directorate-General of Budget, Accounting and Statistics on Friday last week halved its forecast for GDP growth this year from the 3.38 percent projected in May to 1.56 percent.
KMT Policy Committee executive director Lai Shyh-bao (賴士葆) said that unlike the Executive Yuan’s revision to the act, which extends a tax deduction for pay increases given to employees who earn less than NT$50,000 per month, Hung’s plan would benefit people with salaries of NT$35,000 per month or less.
“It is estimated that approximately 6.5 million Taiwanese earn less than NT$35,000 per month, which means the implementation of Hung’s scheme would incur an about NT$1 billion reduction of the nation’s annual tax revenue,” Lai said.
Lai said given that the raises could boost public spending and in turn increase the government’s revenue from consumption taxes, Hung’s proposal would not significantly affect the nation’s coffers.
Separately, DPP caucus whip Ker Chien-ming (柯建銘) criticized Hung’s proposal.
“It is not possible — implementing such a proposal would only increase national debt,” Ker said. “Moreover, it is not fair to use taxpayer money to compensate business — if we do this for businesses, what about the employees?”
He added that no legislators, including those from the KMT, would agree to such an idea.
When told that Lai believes it is a good idea and would try to have the legislature adopt it through a vote if the DPP would not support it, Ker laughed and said: “Tell him to go make the proposal quickly.”
DPP Policy Committee deputy executive director Shih Keh-he (施克和) also expressed his disagreement with Hung’s proposal.
“Improving salaries should start with upgrading the nation’s industries, which is something that the KMT overlooked over the past seven years,” Shih said. “The DPP believes that it is reasonable for businesses to share profits with employees through raises, but it is unreasonable to expect them to give increases because of tax deductions, and the government has no reason to compensate them for it.”
Additional reporting Loa Iok-sin
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